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Can BNPL really benefit UK retailers?

By Gaia Lamperti

July 13, 2022

  • Benefits
  • BNPL
  • E - Commerce
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Buy Now Pay Later (BNPL) payment offers several benefits equally to the customers and the merchants. Among the commonly mentioned perks for merchants, there is sales conversion, as BNPL-accepting retailers have seen growth in revenues in the past couple of years.

According to a new study, 61% of BNPL-accepting retailers in the UK indicated that it had improved their access to new-to-business customers, driving growth in revenue for more than half and profits for 37% of them.

“Even though there’s a fee for retailers to offer BNPL as a payment option, most retailers report a clear improvement in sales and other performance metrics,” explains Mark Schultz, Global Head of Business Payments at RFI Global. “Lack of awareness among retailers of the benefits of BNPL is acting as a clear barrier to growth. Rectifying these misperceptions and educating non-accepting retailers will be key to accelerating the uptake of BNPL in the UK and globally.”

In the UK, more than 17 million consumers have at least tried BNPL services. However, some retailers may be wary about the criticism of this soon-to-be-regulated market with concerns that consumers can run into trouble if they miss their payment instalments, leading them into a dangerous spiral of debt.

The UK government announced last month that it will require BNPL providers to conduct credit checks on users of its services and register with the Financial Conduct Authority, but this may not take effect until 2024.

Also, one in five retailers is concerned about exposing their business to credit risk, as they lack understanding of how BNPL work. To the point that, according to the report, one-third of respondents (37%) said that nothing would encourage them to begin accepting a BNPL service.

Yet, with inflation creating the biggest cost of the living crisis to hit UK consumers in decades, it is in the interest of retailers to provide payment choices. Offering multiple options to the customers and allowing them to better manage cash flow with services like BNPL could turn into a competitive advantage.

Key highlights

  • No interest, No Fee is the main driver – What appeals to British consumers most about BNPL is: no interest charges (41% compared to 33% globally), convenience (31% compared to 33% globally), improved cash flow management so that they can pay other expenses (22% compared to 28% globally) and helping them to budget (28% compared to 31% globally).
  • Repeat use BNPL for bigger ticket items – although online retail dominates BNPL purchases, consumers are interested in using it for higher value items such as electrical goods, household appliances and furniture.
  • Covering everyday expenses – Against a backdrop of soaring inflation, around a third of consumers in the UK have indicated they would use BNPL to pay for everyday expenses such as household bills (34%), groceries (29%) and petrol (27%).
  • Frequent users willing to pay a fee for excellent experience – frequent users of BNPL are finding so much value in using it as a payment option that 47% of BNPL users in the UK say they would still use the provider if fees were attached to it.
  • Consumers averse to debt – Consumers surveyed by RFI Global display a level of aversion to debt and do not want to buy things they cannot afford, even ranking this as one of the key reasons why they do not use BNPL. Rather than leading people towards a dangerous spiral of debt, BNPL is helping them to better manage cash flow by offering short-term interest-and fee-free products, thereby avoiding revolving credit card debt and bank charges.

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